N.J. League of Municipalities push to pay for schools through income-based tax

This week the New Jersey League of Municipalities started a major push to slash property taxes by cutting out their bulkiest cost: Schools. We should pay for schools instead through an income-based tax, the league says.

The last time the league tried a major lobby for property tax reform was 10 years ago but the effort failed from lack of support, said Bill Dressel, the league’s director. But now, as public outcry hits a high pitch, it’s time to try again, he said.

The Star-LedgerA students reads Allentown High School in 2006.
"There didn’t seem to be enough support for the idea at the time. Now property taxes are a major issue," Dressel said.

Property taxes unfairly shift too much of the financial burden to pay for schools to lower-income residents, he said. Limping from the pain of expensive tax bills, many homeowners are moving out of the state in search of places with more reasonable taxes, he said.

On Monday, the league circulated a letter to mayors asking for the support of changing the source of school funding to an income-based tax, Dressel said. The league’s goal is to gather support for reform then lobby the state legislature to enact changes.

Two state policy experts said shifting the source of funding for schools from property taxes to income taxes isn’t likely to work, while a spokesman for public school boards said the association agrees with its aim.

In a resolution the league passed last month during its annual Atlantic City convention, the league states, "The property tax burden inevitably falls inequitably on those least able to pay."

Leslie Barbaro/The RecordWilliam G. Dressel, executive director of the New Jersey State League of Municipalities, listens during an orientation panel at the organization's annual meeting in Atlantic City in November.
The league and others believe the property tax is an "unfair" tax because the tax rate to calculate a homeowner’s property tax bill is the same for all properties, while by contrast, the tax rate for income taxes slides up or down with the level of income.

But if you do the math, there’s little chance the income tax could in coming years generate enough funds to cover schools, said Mary Forsberg, who heads the New Jersey Policy Perspective.

In 2008, schools cost property taxpayers $12.4 billion, or more than half of total property taxes collected, Forsberg said. At the same time, this fiscal year only $10.4 billion is expected to be collected in income taxes, she said.

Henry Coleman, professor at Rutgers University’s Edward J. Bloustein School of Planning and Public Policy put it this way: "You’d have to double the best year ever with the income tax. And we haven't had the ‘best year ever’ in a long time."

Property taxes as a funding source may not be perfect, but at least they’re a reliable tax, he said. Income taxes are volatile, especially with the economic downturn, he said.

Morristown Mayor Donald Cresitello said he supports the league’s idea. Using taxes collected by the state would mean more state control of schools, and thus better reining in of school costs, he said.

"I think all schools should be funded through the state," Cresitello said. "New Jersey needs to get away from home rule. We can’t afford home rule anymore."

Forsberg said asking for more state-collected revenues such as income taxes in a depressed time like now for the state isn’t going to make the league’s mission easy. Officials this week revealed the state plans to withhold $20.7 million in municipal aid to help close an unexpected budget gap.

"It’s interesting they would suggest (reform) would happen now, when the state has less money it’s had in a good long time, and as it’s planning cuts in aid to municipalities and schools," she said.

A spokesman for the New Jersey School Boards Association said he and other members of the group attended a meeting Tuesday with the league, during which the league presented its plan for reform. The association hasn’t yet endorsed the idea but agrees with the aim, he said.

Hefty and unpopular property taxes erode community support for schools, Belluscio said. Reform is urgent, he said.

"I don’t think there’s anything more critical in New Jersey right now," he said.